The Chinese prime minister, Wen Jiabao, has ordered his mandarins to draw up measures to slow the nation's growth, it emerged on Thursday, amid a flood of data suggesting the world's most supercharged economy was close to overheating.

While most other countries can only look on enviously at the pace of China's expansion, which hit an annual rate of 10.3% in the first three months of this year, the government fears that excess capacity is building up as local governments throw money at infrastructure projects, factories build cars for which there are insufficient buyers and the housing market is inflated by a speculative bubble.

At a late-night meeting of the State Council, China's cabinet, on Wednesday, the premier warned that bank lending and corporate investments were rising too quickly.

"We must change the way we just pursue economic growth and blind expansion of investment," said the public minutes of the meeting. "We must improve our economic structure, improve the quality and efficiency of our economic growth."

Underscoring the concern behind his comments, the government announced on Thursday that urban investment in factories and other fixed assets had jumped 30.3% in the first five months of the year compared with the same period in 2005.

Industrial output had risen 17% in a year to 3.17 trillion yuan (£215bn or $396bn), driving up exports and widening the trade surplus in May to a record $13bn - up more than 20% from the previous month.

The country is awash with cash. According to the bureau of statistics, the money supply increased 19% and the amount of new bank loans in May almost doubled from the month before to Y209.4bn.

To curb this exuberance, the central bank said it planned to punish financial institutions that extended credit to overheating sectors, such as housing, cars and cement, by forcing them to buy short-term securities with low yields.

"We will remove fuel from the fire, so that they do not have the money to lend," deputy central bank governor Wu Xiaoling was quoted as saying in state media.

China has been struggling to cool the fastest growing sectors of the economy for more than three years because it fears that overcapacity will eventually lead to bankruptcies, unemployment and financial instability.

In April, the central bank raised interest rates. Last month, it introduced measures to dampen private investments in the market for luxury apartments.

But many local governments, which are among the biggest investors, are finding ways around the controls imposed by the central authorities. Among the most recalcitrant municipalities is Shanghai, which has posted growth of nearly 13% in the first four months of the year, well above its official target for the year of 10%.

President Hu Jintao, who is making a rare visit to the city that is the powerbase of his predecessor Jiang Zemin, called on Shanghai to transform its model of development. But nobody wants to stop the party: by one private estimate, the value of apartments in Shanghai has tripled in the past two years.